CFTC Holds First-Ever Voluntary Carbon Markets Convening

On June 2, 2022, the U.S. Commodity Futures Trading Commission ("CFTC") hosted the first-ever Voluntary Carbon Markets Convening at its headquarters in Washington, D.C. This event brought together climate policy experts from across the regulatory and market spectrum to discuss issues relating to credits for the reduction or removal of carbon dioxide emissions from the atmosphere, also known as carbon offsets. Companies wishing to achieve their climate pledges and emission reduction goals may voluntarily purchase carbon offsets to compensate for emissions that could not otherwise be reduced directly. The CFTC has increasingly emphasized the need for standardization within voluntary carbon markets as well as appropriate safeguards for market integrity.

At the outset of the daylong event, Chairman Rostin Behnam emphasized that voluntary carbon markets present an opportunity for both the derivatives market and regulators like the CFTC to play a larger role in climate risk management. In response, many panelists offered their support for public policy measures aimed at increasing standardization and transparency across voluntary carbon markets. Other panelists, however, cautioned that a universal standard may not account for important distinctions across different sectors. Additionally, panelists emphasized the need to collect the data necessary to ensure the integrity of carbon offsets by demonstrating that they actually result in carbon reduction or emission avoidance. Panelists also offered their perspectives on global supply and demand-side factors impacting high-quality carbon offsets and outlined the evolving market structure for trading carbon offsets and carbon derivatives.

On the same day as the Voluntary Carbon Markets Convening, the CFTC also released a Request for Information ("RFI") seeking public comment on climate-related financial risk within the derivatives and commodities markets. According to the CFTC, the information gathered through this RFI may be used to amend existing policies or regulations. Comments are due by August 8, 2022. The CFTC therefore appears poised to expand its footprint within the regulation of carbon markets and facilitate the transition to a net-zero economy. Indeed, Chairman Behnam underscored that, in the CFTC's role as market regulator, it will implement the necessary rules and regulations to help voluntary carbon markets grow in a responsible way. 

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